BE CAREFUL....BIRDOGGING vs. WHOLSALING.

[Denisha Choice]

I have read and listened to many videos that express how either you want to start your business being a birddog/wholesaler because it can bring you quick profits to it telling me that this practice is illegal and shouldn't be done at all.  This confusion is very rampant and I had to research this for myself because I am very interested in wholesaling.

First I want to clarify the differences of them both and then you will see why people mistakenly interchange those words.  We all know that wholesaling is the practice of taking a property under contract and then assigning it to another owner without actually owning that property.  The big difference: Birddogging skips the whole contract process.  It is literally someone finding a property and bringing it to another and getting a payment/commission at closing from that person.  In this aspect your ARE operating as a real estate agent and it is ILLEGAL.  Birddogging is very much illegal.

Wholesaling is not.  In fact if you take a look at the standard forms for purchase and agreement for your state or any state that you want to do wholesaling in, you will find a numbered line that says Assignments/Assignability.  This is the clause that allows you to wholesale that property or not.  For example in Florida, their contract Residential Contract for Sale and Purchase consists of 13 pages, but you will see clause 7 under Assignability what the State of Florida allows you to do.  Florida gives the buyer 3 options of assigning that property.  The buyer has to make sure to check off either of the 3 options... option 1 says the buyer may assign and thereby be released from any further liability under this contract or option 2 may assign but not be released from liability under this contract and third option may not assign this contract.  Of course the investor being the buyer would not check option 3.  Another example would be California's Residential Purchase Agreement and Joint Escrow Instruction which consists of 10 pages.  Under clause 26 Assignment, this state allows you to assign the property ONLY if you get the permission of the seller and then you have to file another form along with the contract that insures the seller gave you the permission to do so.  Just be sure to check the validity of any contract because each state is different and laws change all the time so be sure to use an updated contract when doing your deals.  The state of Ohio is a whole other issue when it comes to wholesaling.  They prefer that you be licensed just so there are no blurred lines of acting in the capacity of a realtor, but that does not mean you can't wholesale in Ohio.

The bottom line is Wholesaling is legal because by signing that contract you the buyer has gained "equitable interest" in the property and have now become the "principal".  This means you have the ability to direct the title in the future although you do not own the property but if you are not able to find that cash buyer to assign the property, then you have full right to purchase that property yourself.  States are doing their due diligence in protecting homeowners from people who have no intention of every owning that property so if you only want to wholesale then it is suggested that you become a licensed agent.  Since there are many different ways to make a profit in this industry why would you only focus on wholesaling when you clearly make so much more doing flips.  Also I plan on becoming an agent in the future because when I get a handle on flipping, I can keep that commission instead of paying that realtor I would need to hire to sell that flip, so it makes sense in the long run.  I mean we are in this industry to make money.

Hope this was helpful.... be kind and smile!